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India’s the most densely populated democracy on the planet, with around 1.3 billion people. It’s also home to huge and some of the fastest-growing companies in the global startup scene.
How’s India growing?
- India’s the most densely populated democracy on the planet, with around 1.3 billion people. It’s also home to huge and some of the fastest-growing companies in the global startup scene.
- With that, many American investors like Tiger Global Management LLC and Sequoia Capital Operations LLC are getting involved in the country’s quickly growing startup scene.
- In fact, during the first half of this year, there were 166 new US$1 billion dollar companies in the United States, when there were only 163 in all of 2020. While the US contributed the most to the increase in unicorns, India came in second with six new unicorn companies.
- These two investment firms, though, have been pouring billions of dollars into the nation’s startup ecosystem, wanting to capitalize on the developing economy and the potential that comes with it.
- Part of the reason for these large investments in India is due to the country’s massive infrastructure and economic growth, with the country seeing nearly an over nine percent rise in gross domestic product (GDP) this year alone.
What are some of the large tech companies in India?
- Two of the largest companies making waves in India this year are Flipkart and Apna.
- Flipkart, India’s most popular online shopping website, reported back in July that they raised over US$3.6 billion in their most recent fundraising round, putting the company’s valuation at US$37.6 billion.
- Like Amazon, Flipkart is an online e-commerce website based in India that initially started by selling online books before expanding into more products and a broader market.
- Apna, on the other hand, was founded by Nirmit Parikh. The platform is designed to help workers in India find jobs, so it’s basically India’s own LinkedIn for the less affluent demographic.
- The platform now has over 150,000 employers and over five million active jobs.
- Outside of just these two companies, it seems new billion-dollar companies are emerging almost every month in India. In early September of this year, The Hurun Research Institute released the Hurun India Future Unicorn List 2021, which revealed that the country added three unicorns per month this year. An example is payment platform Paytm, which raised US$2.5 billion this past week as it looks to go public.
Why’s India’s tech scene thriving?
- China was a longtime favorite of unicorn hunters, but after a series of regulatory crackdowns against domestic companies across various industries, investors grew a little nervous about putting their money into Chinese companies.
- For example, in August of this year, SoftBank Group Corp. announced that they would halt investments into the Chinese market until there was more clarity surrounding the regulatory situation. “We are not against or for the Chinese government, and we don’t have any doubt about future potential of China. But again, new rules and new regulations are beginning to be implemented, so until things get settled, we want to wait and see,” said chief executive officer Masayoshi Son during an earnings call.
- So, these investors have started investing elsewhere, such as India, which now is home to 66 unicorns.
- “India is the target market for Tiger Global, not possibly China or the U.S.,” said Sreedhar Prasad, an internet business expert, and ex-partner at KPMG. “The reason being that there is a population of 500 million in the country who are not being catered to by the investment companies, so the size of the addressable market in India is bigger than any other country.”
- Part of India’s rapid rise in the startup market also comes from the country’s advancements in infrastructure and technology.
- “Indian entrepreneurs have been quietly building startups for a decade now, the country’s internet infrastructure has vastly improved in that time and there’s a very good appetite for tech stocks globally,” said Hans Tung of GGV Capital. “Investors are beginning to see the huge upside and they expect India to be a China.”
What do people think of this growth?
- Well, Prasad believes that Tiger is intentionally investing heavily into India to increase the average valuation of companies in the country.
- “Tiger Global is investing in more startups to push them into the unicorn club because it is trying to dictate the valuation of more and more Indian startups which would provide them with a terminal position in India’s unicorn ecosystem,” he explained.
- Some experts see India’s growth as a direct response to the crackdowns that big tech companies have seen in China.
- “India really stands out this year, with China decelerating,” said Todd McClone, a portfolio manager at William Blair’s Emerging Markets Growth Fund. “With accelerating growth, lots of good companies and all the demographics that stand behind it, I think it gave people a lot of confidence to come back to that market.”
- While the country of India has a massive population size that rivals China’s, a huge benefit the economy has is that a large percentage of that population is also young. More specifically, under the age of 15.
- According to the World Bank, over a quarter of India’s population – more than 360 million people – are under 15.
- These young people are the future of India, and they are helping drive the tech scene that is currently growing in India despite not being a part of the workforce yet.
- While there are a lot of young people who can enter into the workforce, the question becomes whether or not India can actually provide enough job opportunities to keep these young people working in their country. This is sort of the opposite problem that many other countries are currently facing.
- Still, India’s tremendous growth has continued to show promise for investors as billions of dollars continue to be dumped into the country.